What Is TTM And How Can You Use It?

best blue chip stocks

TTM stands for trailing twelve months. It’s used to represent the performance of company. That said, TTM is calculated manually by adding the last four quarterly values. You can use TTM for metrics like: revenue; operating income; operating margin; net income; diluted earnings per share; operating cash flow; capital spending; free cash flow and anything else you’ll see on an income statement.

The reason TTM is used is  because some company’s fiscal year don’t coincide with the calendar year.

For example, look at Alibaba Group Holding (NYSE: BABA):

ttm baba

Source: Alibaba

As you can see, Alibaba reports its December 2017 quarterly results during the third quarter of 2018. Using TTM can be helpful for companies that report in this fashion.

ttm example baba

Source: Morningstar

According to the SEC, firms must file their quarterly earnings for each of the first three fiscal quarters of the company’s fiscal year.

Here are the rules:

form 10q SEC

Source: SEC

Where To Find TTM

You can calculate the trailing twelve month numbers by using income statements from a company’s quarterly reports. Since the data doesn’t represent a calendar year, it can show fluctuations due to seasonality.

Trailing twelve month numbers are drawn using the last interim or quarterly report that company’s issue.

How TTM Is Calculated

Most Recent Quarter(s) + Most Recent Year – The Corresponding Quarter(s) 12 Months Before the Most Recent Quarter(s)

The trailing twelve month calculation is helpful for analysts covering a security. You see, some company’s will issue preliminary earnings reports. Analysts can use this info when its time to make a recommendation on a stock.

In addition, long-term investors can find the TTM calculation useful when they’re analyzing the fundamentals of a stock. However, if you’re primarily a day trader then the calculation will not be as actionable.

Bottom Line

Publicly traded company’s must file quarterly results to stay compliant with the SEC. However, not every company has the same fiscal year. That said, the trailing twelve month figure can be a helpful tool for analysts and long-term investors.

Leave a Reply

Your email address will not be published. Required fields are marked *

[index]
[index]
[523.251,1046.50]
[523.251,1046.50]
[523.251,1046.50]
[523.251,1046.50]
[index]
[index]
[523.251,1046.50]
[523.251,1046.50]
[523.251,1046.50]
[523.251,1046.50]